Napa Auto Parts 2003 Annual Report Download - page 35

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The effect of a one-percentage point change in the 2003
assumed health care cost trend is as follows:
The Medicare Prescriptions Drug Improvement and
Modernization Act of 2003 (the “Act”) was signed December
8, 2003 to make additional voluntary benefits available
through Medicare. As permitted by FASB Financial Statement
Position No. 106-1, the Company has elected not to recognize
the effects of the Act in the 2003 financial statements and
accompanying notes. The Company will be evaluating the
implications of the Act during 2004 and recognize expected
financial effects as prescribed by accounting standards in
effect for subsequent reporting periods. Specific authoritative
guidance on the accounting for the federal subsidy is pending
and that guidance, when issued, could require the Company
to change previously reported information.
The Company has a defined contribution plan, which covers
substantially all of its domestic employees. The Company’s
contributions are determined based on 20% of the first 6%
of the covered employee’s salary. Total plan expense was
approximately $5,674,000 in 2003, $6,112,000 in 2002 and
$5,901,000 in 2001.
10. GUARANTEES
Certain operating leases expiring in 2008 contain residual
value guarantee provisions and other guarantees which
would become due in the event of a default under the
operating lease agreement, or at the expiration of the
operating lease agreement if the fair value of the leased
properties is less than the guaranteed residual value. The
maximum amount of the Company’s potential guarantee
obligation at December 31, 2003 is approximately
$80,057,000. The Company believes the likelihood of funding
the guarantee obligation under any provision of the
operating lease agreements is remote.
As discussed in Note 1, the Company also guarantees
borrowings of certain independents and affiliates. The
total borrowings of the independents and affiliates subject
to guarantee by the Company at December 31, 2003 were
approximately $163,006,000. These loans generally mature
over periods from one to ten years. In the event that the
Company is required to make payments in connection with
guaranteed obligations of the independents or the
affiliates, the Company would obtain and liquidate certain
collateral (e.g. accounts receivable and inventory) to recover
all or a portion of the amounts paid under the guarantee.
To date, the Company has had no significant losses in
connection with guarantees of independents’ and affiliates’
borrowings.
11. SEGMENT DATA
The segment data for the past five years presented on page
12 is an integral part of these financial statements.
The Company’s automotive segment distributes replacement
parts (other than body parts) for substantially all makes and
models of automobiles, trucks and buses.
The Company’s industrial segment distributes a wide variety
of industrial bearings, mechanical and fluid power trans-
mission equipment, including hydraulic and pneumatic
products, material handling components, and related parts
and supplies.
The Company’s office products segment distributes a wide
variety of office products, computer supplies, office furniture
and business electronics.
The Company’s electrical/electronic materials segment
distributes a wide variety of electrical/electronic materials,
including insulating and conductive materials for use in
electronic and electrical apparatus.
Inter-segment sales are not significant. Operating profit
for each industry segment is calculated as net sales less
operating expenses excluding general corporate expenses,
interest expense, equity in income from investees, goodwill
and other amortization and minority interests. Net property,
plant and equipment by country relate directly to the
Company’s operations in the respective country. Corporate
assets are principally cash and cash equivalents and head-
quarters’ facilities and equipment.
For the year ended December 31, 2001, Facility Consolidation
and Impairment Charges discussed in Note 3 totaling
approximately $12,900,000 have been classified as a
reduction to operating profit of the office products
segment for management reporting purposes. Additionally,
for management purposes, net sales by segment excludes
the effect of certain discounts, incentives and freight billed
to customers. The line item “other” represents the net
effect of the discounts, incentives and freight billed to
customers which are reported as a component of net sales
in the Company’s consolidated statements of income.
(In Thousands) Decrease Increase
Total service and interest cost
components on net periodic
postretirement health care benefit cost $ (97) $ 145
Accumulated postretirement benefit
obligation for health care benefits (1,002) 1,429